According to a recent Manulife Bank survey more than one third of Canadian households have been covering monthly living expenses by running up credit lines, credit cards, or even selling off investments and hitting up family members for much needed cash. More troubling however is that the survey also found that 14 percent of those already stuck in the debt hole have had to turn to more desperate measures over the past year including liquidating portions of their RRSPs or turning to high interest payday lenders.
Part of the blame appears to belong to the higher price of housing whereby consumers may be keeping up with mortgage payments but struggling with unexpected expenses and other living costs, leading to consumers offsetting these costs by taking on additional debt.
As a collection agency with offices in Edmonton, Calgary and the GTA we recognize that the vast majority of consumers we inevitably end up dealing with are good people, with good intentions that have now simply arrived at the tipping point of having to either try to continue to rob Peter to pay Paul or, in the alternative, to make some hard choices in monthly budgeting in order to honour their outstanding financial obligations.
The latest Statistics Canada census figures available show that more than a quarter of Canadian households were shelling out shelter costs at or above the housing-affordability threshold defined by the Canada Mortgage and Housing Corporation as 30 per cent of their income. That was in 2011; housing prices — fueled by record low interest rates — have risen by double digits since then.
What we found strangely puzzling however about the survey is the level of confidence that Canadian consumers have in their ability to handle unexpected expenses, with nearly three-quarters of respondents saying they could handle it if they had to replace their furnace or were hit with a major car repair. Yet half of those surveyed said they are already struggling to maintain a cushion of as much as $1,000 in a bank account! We suspect this confidence is grossly misplaced and more accurately confirms, if anything, the misplaced confidence consumers have that they can continue to obtain easy credit to bridge the gap into perpetuity.